China: China's NDRC Tables Further Streamlined Outbound Investment Rules

Overseas investment from China has experienced rapid growth each year in the last several years, with the Ministry of Commerce ("MOFCOM") reporting USD735.1 billion in new investment having been deployed overseas by Chinese investors in 2015. At the same time, the growing volume of overseas investment masks challenges. Often a significant obstacle to successful completion of an overseas acquisition by a Chinese enterprise, particularly in the context of a competitive bid, is the set of Chinese regulatory filings to which the acquisition is subject. These filings often contribute uncertainty to the transaction and cause delays and are a source of frustration for both Chinese enterprises and their overseas investment targets.

Both MOFCOM and the National Development and Reform Commission ("NDRC") have taken steps over the last three years to simplify and streamline the regulatory framework for overseas investment. Based on the release on April 13, 2016, of the Draft NDRC Decision on Revising the Administrative Measures on Approval and Record-filing of Outbound Investment Projects (国家发展改革委关于修订《境外投资项目核准和备案管理办法》的决定(公开征求意见稿) ) (the "Consultation Draft"), it seems that the NDRC contemplates more far-reaching reforms. The period for public consultation in respect of the Consultation Draft ended on May 13, 2016, and it is expected that the NDRC will issue amended rules on outbound investment projects based on the Consultation Draft soon.

We discuss the key elements of the Consultation Draft below.

  • Changes to "Road Pass (路条)" Regime
  • A particularly onerous requirement of Chinese overseas investment rules is the requirement that a Chinese enterprise obtain initial approval from the NDRC before commencing any "substantive work" (including signing a binding agreement or making a binding offer) on any major transaction. The necessity of this approval – sometimes referred to as a "road pass" (路条) – can sometimes cause unwanted uncertainty. The NDRC is required to confirm that the transaction complies with Chinese overseas investment policies. The approval process has historically given the NDRC discretion to determine which Chinese entity has the right to pursue a particular overseas transaction. Although there is no specific provision in the law contemplating this, the NDRC has typically issued only one road pass for a given transaction, thus eliminating competition amongst Chinese enterprises for the same deal.

    2014 measures of the NDRC – the Administrative Measures on Approval and Record-filing of Outbound Investment Projects (境外投资项目核准和备案管理办法 ) (the "Measures"), which came into effective on May 8, 2014, and were amended on December 27, 2014 – took a step to liberalize the road pass requirement, limiting projects that require a road pass to those with investment of USD300 million or more.

    The Consultation Draft goes one step further and proposes to streamline the road pass process. No longer is the NDRC required to consider whether the proposed deal is in line with the State's overseas investment policies. It also recharacterizes the road pass document issued by the NDRC from a "confirmation letter" (确认函) to an "acceptance receipt" (收悉函) and requires the NDRC to issue such acceptance receipt within seven working days after receiving the application. Finally, it adjusts associated penalties so that Chinese enterprises are not penalized for commencing substantive work on a relevant transaction before the road pass is issued, but only if they commence work before submitting the filing to the NDRC.

    The more passive role being contemplated for the NDRC, together with the other changes, suggests that the road pass system will be reduced to a filing regime, with applicants obtaining only an acknowledgement of filing from the NDRC and with more than one applicant able to complete a filing in respect of a single transaction. This change should open up competition among Chinese enterprises in the overseas M&A market and reduce the uncertainties historically associated with the NDRC's road pass regime.

  • Streamlining Approval of Certain Overseas Investment Transactions
  • Generally speaking, overseas investment transactions are subject to a "filing-for-the-record" (备案) procedure with the NDRC before the transaction closes, which does not involve substantive regulatory review of the transaction. Pursuant to the Measures, only transactions involving investment into a sensitive country (region) or industry核准) – approval by the NDRC or, if the transaction involves investment of USD2 billion or more, then approval by the State Council on the basis of an opinion from the NDRC. 1 are subject to regulatory approval (

    The Consultation Draft contemplates elimination of the role of the State Council, which would mean that NDRC approval is sufficient even for overseas investment transactions involving both investment of USD2 billion or more and investment into a sensitive country, region or industry.

  • Removal of Requirement for Opinion from Provincial Counterpart of NDRC
  • The Measures require that applications from "local enterprises"2 for NDRC approval of overseas investment transactions into sensitive countries (regions) or industries be accompanied by the opinion of the relevant provincial counterpart of the NDRC on the transaction.

    The Consultation Draft contemplates the elimination of this requirement. Applications for this approval from local enterprises must still be submitted to the NDRC via its relevant provincial counterpart, but the NDRC's provincial counterpart can directly forward the application to the NDRC for its approval without having to formulate its own view on the transaction.

  • Letter of Intent from Financiers No Longer Required
  • The Measures require that the pre-closing applications for approval from/filing-for-the-record with the NDRC or its provincial counterpart in respect of an overseas investment transaction be accompanied by a letter of intent from a bank containing key financing terms for the project, if the transaction is subject to bank financing. The Consultation Draft contemplates removal of this requirement.

  • Regulatory Regime for Investment in Taiwan
  • The Measures provide that investment by Chinese enterprises into Taiwan is to be regulated under separate regulations. The Consultation Draft contemplates instead that investment into Taiwan will be subject to the same regime governing overseas investment, one additional requirement being that the NDRC consult with the Taiwan Affairs Office before granting any approval or completing any filing-for-the-record in respect to an investment transaction into Taiwan.

The Chinese government continues to relax the regulatory regime relevant to overseas investment. Look for issuance by the NDRC of new regulations to implement the changes contemplated by the Consultation Draft, and for other changes to overseas investment rules by the NDRC, MOFCOM and the State Administration of Foreign Exchange in order to reduce deal uncertainty and facilitate the ability of Chinese enterprises to bring overseas investment transactions to successful completion in a timely manner, particularly in the context of a competitive bid.


1 The Measures specifically define "sensitive countries or regions" as those with which China has does not have diplomatic relations and those which are under international sanctions or are involved in wars or domestic chaos. "Sensitive industries" are defined to include telecommunications infrastructure, cross-border water resources development, large scale land development, power mains, power grids and news media.

2 The Measures provide no definition of the term "local enterprise", but it is generally understood to refer both to privately-owned enterprise as well as State-owned enterprise invested in and supervised by local rather than the central government.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Paul D. McKenzie
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.